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Exam 10: Liabilities: Current, Installment Notes, and Contingencies

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Question 31

True/False

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​An installment note is a debt that requires the borrower to make equal periodic payments to the lender for the term of the note.

A) True
B) False

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Question 32

Multiple Choice

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Assuming no employees are subject to ceilings for their earnings, Harris Company has the following information for the pay period of January 15-31. Use this information to answer the questions that follow. -According to a summary of the payroll of Scotland Company, $450,000 was subject to the 6.0% social security tax and $500,000 was subject to the 1.5% Medicare tax. Federal income tax withheld was $98,000. Also, $15,000 was subject to state (5.4%) and federal (0.8%) unemployment taxes. The journal entry to record accrued payroll taxes would include a

A) debit to SUTA Payable of $810
B) debit to SUTA Payable of $18,900
C) credit to SUTA Payable of $810
D) credit to SUTA Payable of $18,900

E) All of the above
F) B) and D)

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Question 33

Multiple Choice

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On January 1, Gemstone Company obtained a $165,000, 10-year, 7% installment note from Guarantee Bank. The note requires annual payments of $23,492, with the first payment occurring on the last day of the fiscal year. The first payment consists of interest of $11,550 and principal repayment of $11,942. The journal entry to record the payment of the first annual amount due on the note would include a

Which of the following taxes are employers required to withhold from employees?

Generally, all deductions made from an employee's gross pay are required by law.

Davis and Thompson have earnings of $850 each. The social security tax rate is 6% and the Medicare tax rate is 1.5%. Assuming that the payroll will be paid on December 29, what will be the employer's total FICA tax for this payroll period?

Match each payroll item that follows to the one item (a-f) that best describes its characteristics. -Federal unemployment compensation tax (FUTA) A)Amount is limited, withheld from employee only B)Amount is limited, withheld from employee and matched by employer C)Amount is limited, paid by employer only D)Amount is not limited, withheld from employee only E)Amount is not limited, withheld from employee and matched by employer F)Amount is not limited, paid by employer only

​The journal entry a company uses to record pension rights that have not been funded for its salaried employees at the end of the year is

The discount on a note payable is charged to an account that has a normal credit balance.

Journalize the following entries on the books of the borrower and creditor. Label accordingly. (Assume a 360-day year is used for interest calculations.)

Excom sells radios and each unit carries a two-year replacement warranty. The cost of repair defects under the warranty is estimated at 5% of the sales price. During September, Excom sells 100 radios for $50 each. One radio is actually replaced during September. For what amount in September would Excom debit Product Warranty Expense?

Match the following terms or phrases in (a-g) with the explanations in 1-8. Terms or phrases may be used more than once. -Reasonably possible likelihood of a liability A)Current ratio B)Working capital C)Quick assets D)Quick ratio E)Record an accrual and disclose in the notes to the financial statements F)Disclose only in notes to financial statements G)No disclosure needed in notes to financial statements

The proceeds from discounting a $20,000, 60-day, note payable at 6% is $20,200.

On January 1, Year 1, Zero Company obtained a $52,000, 4-year, 6.5% installment note from Regional Bank. The note requires annual payments of $15,179, beginning on December 31, Year 1. The December 31, Year 3 carrying amount in the allocation of periodic payments table for this installment note will be equal to

Baker Green's weekly gross earnings for the week ending December 7 were $2,500, and her federal income tax withholding was $525. Assuming the social security rate is 6% and Medicare is 1.5%, and all earnings are subject to FICA taxes, what is Green's net pay?

Assuming no employees are subject to ceilings for their earnings, Harris Company has the following information for the pay period of January 15-31. Use this information to answer the questions that follow. -A pension plan that requires the employer to make annual pension contributions, with no promise to employees regarding future pension payments, is termed

The journal entry to record the issuance of a note for the purpose of converting an existing account payable would be

Perez Company has the following information for the pay period of January 15-31. Assuming no employees are subject to ceilings for their earnings, calculate salaries payable and employer payroll tax expense.

The accounting for defined benefit plans is usually very easy and straightforward.

Ecco Company sold $150,000 of kitchen appliances with six-month warranties during September. The cost to repair defects under the warranty is estimated at 6% of the sales price. On October 15, a customer required a $200 part replacement, plus $85 labor under the warranty.​ Provide the journal entry for (a) the estimated expense on September 30 and (b) the October 15 warranty work.